Humana's lack of 2026 commentary spooks investors

By Sriparna Roy and Sneha S K

Nov 5 (Reuters) - Health insurer Humana's HUM.N shares fell more than 7% after it did not provide performance commentary for 2026, disappointing investors even as it reported better-than-expected quarterly profit on higher revenues and in-line medical costs.

The company did not provide membership or profit forecasts for 2026 in its quarterly results on Wednesday and at least two analysts said the lack of clarity on next year's performance could be weighing on sentiment.

Lower quality ratings for its Medicare Advantage plans have been a concern for next year as they could cost Humana millions of dollars in bonus payments from the U.S. government.

It was too early in the Medicare enrollment period to assess membership patterns, Humana CEO Jim Rechtin said in a call with analysts.

"We have made good progress from what we can see in the first couple of weeks, and we'll share more as we better understand what that is (and) where that's going to land, in January."

Humana is one of the largest providers of Medicare Advantage plans for people 65 and older and those with disabilities, and gets most of its revenue from those plans. It has been attempting to contain costs by repricing plans and adjusting benefits to boost profits.

The company expects improved membership, with most new members on higher-rated plans, in 2026.

"Investors care the most about comments on 2026," said Leerink Partners analyst Whit Mayo.

Humana said in October it has about 1.2 million members enrolled in Medicare Advantage plans rated 4 stars and above for 2026.

MEDICAL COSTS

The health insurance industry has been battling stubbornly high costs for the last two years due to the increased use of healthcare services across government-backed plans.

Humana's quarterly medical cost ratio - the percentage of premiums spent on medical care - came in at 91.1%, in line with the company's expectations. Analysts, however, had expected a ratio of 90.90%, according to data compiled by LSEG.

It reaffirmed its 2025 adjusted profit and cost forecasts, but trimmed its annual net profit forecast to $12.26 per share from $13.77 per share and warned medical costs would likely hit the upper end of its 90.1% to 90.5% range.

Humana expects a decline of about 425,000 members in its individual Medicare Advantage plans in 2025, smaller than a loss of up to 500,000 members expected previously. This was driven by stronger member retention and better-than-expected sales.

It also expects membership growth of about 160,000 in its Medicaid plans for low-income people in 2025, lower than its previous expectation of growth of 175,000 to 250,000 members.

"We are prepared to take further mitigating actions... if it appears that new sales will put member experience at risk," Rechtin said.

The company posted adjusted quarterly profit per share of $3.24, surpassing an estimate of $2.82 per share.